BBVA to test syndicated loans over blockchain

BBVA CEO Carlos Torres Vila opened the seminar in Santander organized by the International Menéndez Pelayo University and the Spanish Association of Economic News Journalists (APIE), which this year puts the spotlight on blockchain. BBVA’s CEO lauded digital transformation as a way to improve people’s lives. Additionally, he released the news that in May, BBVA’s digital sales reached 40% of the total, and that the Group will begin testing the negotiation and contracting of syndicated loans using blockchain. Finally, he stated that technological development fosters long-term economic progress and social well-being, which requires collaboration between public and private institutions.

BBVA’s mobile banking app has been named a leader in Europe. According to the report published today by Forrester Research, ‘The Forrester Banking Wave: European Mobile Apps – Q2 2018’ BBVA has the top-ranked app with an overall score of 87/100. Forrester assessed 12 mobile banking apps from top financial institutions on the continent. Garanti, BBVA’s Turkish franchise, took the second spot in the same evaluation. BBVA also took the top spot in last year’s analysis also published by Forrester.

In his participation in the seminar, ‘The Economy in the Face of Blockchain. What’s Coming,’ BBVA’s CEO stressed the transformative power of new technologies and the use of data, “that has overstretched the limits of what we thought possible and will keep enabling things, even the unimaginable.”

In the case of BBVA, he said that the Group has always seen digital transformation as an opportunity to improve peoples’ lives. “We understood the impact of new technologies on our business before everyone else did, and we took the initiative to respond, staunchly supporting the digital transformation. That transformation is now a reality. That is why we are the benchmark. Because we have come so far.”

“In this age,” said Carlos Torres Vila, “opportunities are in the digital world.” From there arose BBVA’s mission: to bring the age of opportunity to everyone. The key to making this objective a reality is the digitization of the customer’s relationship with the bank – because digital channels allow this relationship to occur anywhere, anytime, conveniently for the customer with a simpler, more flexible user experience.

This has resulted in BBVA’s having 24 million digital customers, of which 19.3 million are mobile customers. The objective is to have digital customers making up 50 percent of the bank’s customer base by the close of 2018, reaching the same percentage for mobile customers during 2019. Carlos Torres Vila also stressed the extraordinary growth of digital sales, which two years ago hardly represented 13 percent, and which reached 40 percent of the total according to May’s closing figures.

Data management based on trust

But data management has to start with customer consent, where the cornerstone is trust. The CEO confirmed that BBVA starts from a good level of trust, and that thanks to the added value we foster, he predicts that that trust in the bank will grow, thereby creating a true virtuous cycle.

Carlos Torres Vila gave some examples of BBVA’s value-added solutions based on data: the ability to predict future transactions and account balances as offered by BBVA Spain’s app – ranked number one in the world in 2017 and the best in Europe for the second year running by Forrester –; BBVA Invest, which helps determine the best savings investments; BBVA Valora, which helps customers and non-customers alike when shopping for a new home; and Valora View, a new functionality that uses augmented reality while users are house-hunting.

Can Big Tech take the place of banks in the financial services sector? According to Francisco González in his op-ed article in today’s edition of Financial Times, while the Big Tech’s threat is widely known, digitization opportunities for some banking institutions are less evident. BBVA Group Executive Chairman is confident that “we have what it takes to redesign banking and to bring about the next stage of this industry’s evolution.”

BBVA’s CEO recognized that blockchain’s advantages are so important that the bank is spearheading a number of proof of concepts and pilots so that when the technology has matured, and the market and the regulators are ready, “we will be the first ones to fully take advantage of blockchain so that our customers have better, cheaper, more transparent and faster solutions.”

Along these lines, BBVA was the first global bank to conduct an end-to-end corporate loan, in collaboration with Indra, using blockchain technology, which allowed the process to be reduced from days to a matter of hours. It also added better transparency to the process. The next challenge for BBVA, according to Carlos Torres Vila, “is to make the negotiation and contracting of syndicated loans more flexible using blockchain.” It entails a cutting-edge project for the industry, and BBVA is already ready to move into the testing phase. There is a significant level of complexity given that it involves the rollout of a network to be used by various participants sharing information transparently and reliably.

But, beyond speed improvements, efficiency, and transparency of transactions, BBVA’s CEO stated that blockchain’s true potential lies in its ability to lead to a decentralized and tokenized economy.

Decentralized because it doesn’t need an intermediary to oversee transactions, understood in the wider sense as any exchange of goods or services. For example, if the travelers looking for a ride and the taxi drivers providing the service could communicate and transact directly through a blockchain network, there’d be no need for the intermediary, i.e. the platform rendering the service today.

Regarding the tokenization, Carlos Torres Vila explained that this term refers to the possibility of creating digital units representing ownership over a physical item. These tokens can also be divisible to facilitate their exchange in blockchain markets, thus increasing the liquidity of traditionally illiquid items thanks to the improved dissemination of information, the ease and efficiency of the contracting process, log generation and traceability, the possibility of fractioning ownership, etc.

Inclusive progress

The transformation brought on by technological development, – said Carlos Torres Vila – promotes economic progress and social well-being in the long term. But this challenge is subject to regulatory obstacles and imbalances.

In this sense, the CEO set forth three priorities that need to be addressed to bolster the positive effects of an inclusive digital progress.

Society as a whole, and very particularly public authorities, need to proactively embrace and manage change.

The public policies required to promote digital progress must be put in place to underpin Spain’s position as an innovation hub, capable of attracting talent and investment. In this sense, Carlos Torres Vila advocated the creation of regulatory sandboxes, similar to those that already exist in other countries, test environments where innovative solutions can be tested without, temporarily, the burden of heavy regulation. “The development of regulatory ‘sandboxes’ can foster blockchain experimentation,” said the CEO.

Regulations and supervisors should stay up to date on the ever-changing and globalized field of tech innovation, to provide a coordinated and quick response to new products as they emerge.

Carlos Torres Vila concluded by emphasizing that anticipation is key to leveraging the opportunities of this new era, and that for this purpose, coordination between public and private players is essential.

BBVA is one of the 10 members of the consortium for financial innovation R3, which have worked together to develop a proof-of-concept (PoC) for a shared KYC (Know Your Customer) system using distributed ledger technology.

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